A dbt project keeps SQL models, YAML properties, seeds, tests, snapshots, and macros in separate folders. The project file tells dbt where to find those resources and how to apply defaults. File names become model names, while folders help people organize work and select groups of resources.
A YAML properties file documents and tests models; it doesn't replace their SELECT statements.
Configuration has a scope. A project default can apply to a whole folder, and a config call inside a model can override it for that model. That makes a small spelling or indentation mistake hard to spot: the model may still run with a different materialization than you intended.
Keep the project name consistent with the model configuration tree. The checks inspect both the data and the relevant model configuration.